Nov 9 A long-running class-action lawsuit
accusing trading firms on the New York Stock Exchange of
improperly executing trades for their dealer accounts ahead of
their clients has reached an $18.5 million settlement, court
The accord is between investors and firms that include Bank
of America Corp and Goldman Sachs Group Inc. It
was disclosed in court papers submitted to the U.S. District
Court in Manhattan, date-stamped Oct. 26.
The plaintiffs accuse the trading firms of self-dealing and
engaging in improper proprietary trading in their status as
specialist firms for the New York Stock Exchange, which
funneled trades through them.
U.S. District Judge Robert Sweet has scheduled a Nov. 28
hearing to consider approving the settlement.
In addition to Bank of America and Goldman, the defendants
include LaBranche & Co Inc, at one time the largest specialists
and now owned by Cowen Group Inc ; Bear, Stearns & Co,
Inc, now owned by JPMorgan Chase & Co ; and Susquehanna
The litigation, which began in 2003, also named as a
defendant the NYSE, which was accused of neglecting or
abandoning its regulatory duties to oversee the firms. The NYSE
reached a separate settlement in 2010.
Of the $18.5 million in the proposed settlement, $750,000
has already been paid by defendant Van der Moolen Holdings,
N.V., a Dutch equity trading firm that filed for bankruptcy in
2009, according to court papers.
The settlement provides that investors may seek additional
compensation in Van der Moolen's Netherlands bankruptcy
In a motion filed on Thursday, the other defendants said
they continue to deny wrongdoing or liability as part of the
Spokespeople for the defendants either declined comment or
did not respond to requests for comment.
David Mitchell, a lawyer for the plaintiffs with Robbins
Geller Rudman & Dowd, did not respond to a call and email
The papers were not filed electronically with the court as
of Nov. 9. They were obtained at the court by Reuters after
other records filed Thursday made reference to the settlement.
The alleged self-dealing by the specialist firms was at the
center of an earlier $240 million settlement, in 2004, between
the five biggest firms and the U.S. Securities and Exchange
Later in 2004, Judge Sweet declined to dismiss the class
action, though he said investors would not be allowed to recover
funds relating to trades that were covered in the regulatory
The lead plaintiff, California Public Employees' Retirement
System, later moved to have the case certified as a class
action. Sweet granted that request in 2009.
The NYSE reached a settlement in the class action in 2010
after nearly all the claims against it were dismissed. As part
of the deal, it agreed to cooperate with CalPERS as it continued
to pursue the lawsuit.
The case is In Re: NYSE Specialists Securities Litigation,
U.S. District Court, Southern District of New York, No.